Labour Relations Law - Tailor-made laws in the Western Balkans and Turkey

Labour Relations Law (Official Gazette of the Republic of Macedonia, No. 62/2005)

Act of Parliament

Substantive: labour relations between employers and employees in North Macedonia, specifically redundancy procedures due to economic, technological and structural changes on the employer’s side.

Personal: employees

Territorial: national

Temporal: the law is in force, but it was amended in 2010 (Official Gazette 124/2010, Article 16).

Published on 28 July 2005 and entered in force on 5 August 2005

Ministry of Labour and Social Policy

Ministry of Labour and Social Policy

Magyar Telekom representatives have been involved in a big corruption case brought before the US District Court of New York by the US Securities and Exchange Commission. The executives were accused of misconduct for investing millions of euros in fallacious consultation agreements and for bribing Macedonian politicians. The requests made to politicians included tailoring provisions of the new labour law. Email correspondence between Magyar Telekom executives and the consulting firm’s representatives, who acted as facilitators of the negotiation process between the Macedonian government and Magyar Telekom in the privatisation of Macedonian Telecommunications, revealed corruptive influence on the Labour Relations Law.

Documentation and correspondence between the Stonebridge Group, which was formerly part of Magyar Telekom and the majority owner of Macedonian Telecommunication, and Cypriot company Chaptex shows that Chaptex was hired for lobbying services on the Labour Relations Law. Chaptex claimed to have cancelled the modification of provisions on the trade unions’ involvement in the layoff of employees. The Stonebrige Group paid Chaptex €980,000 for their services. The communication between human resources managers of Macedonian Telecommunications, Marty Halashi and Joseph Baranji, brought to light more evidence that Magyar Telekom and Macedonian Telecommunications influenced the drafting of the law. The Stonebridge Group paid almost €1 million for lobbying activities to ensure that the provisions of the new Labour Relations Law made it easy and cheap to fire surplus staff.

President Branko Crvenkovski signed the Law on 22 July 2005. This was roughly two months after the contract between Stonebridge Group and Chaptex was agreed to make changes in the law.

Parliament of North Macedonia

The law is being enforced. New provisions were added in 2010. Articles 68-a and 68-b now protect labour rights by ensuring participation of trade unions in the process of transferring employees to a new company.

In 2011, the Public Prosecution Office opened an investigation on the former general director and the former financial director of Macedonian Telekom for abuse of official position and concluding fictitious contracts for consulting services with Cypriot companies. The corruption case known as Magyar Telekom involves millions of euros.

The directors are suspected of having arranged fictitious contracts for consulting services with the Cypriot consulting company Chapteks Holdings Limited. Consequently, they damaged Macedonian Telekom and the state budget by €2 million since the government owned 47% of the company’s shares in that period.

Labour rights

Magyar Telekom, Macedonian Telecom

Employees in Macedonian Telecom who were deemed surplus.

As a result of the law, over 1000 employees were made redundant with severance payments lower than those requested by the trade union (see here).

The money paid for fictitious consulting service contracts by the Macedonian Telecommunication owners, Magyar Telekom, to Chaptex damaged the state budget by €2 million, since the government owned 47% of the company's shares.

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Magyar Telekom was indicted by the Macedonian Public Prosecution for criminal association and misuse of public position and contracting fallacious consultation agreements with Cyprus firms. The indictment was against the General Director of Macedonian Telecom Attila Szendrei, the Financial Director Rolf Plath, and Mihail Kefaloyannis and Zoltan Kisjuhasz, members of the Board of Directors. The indictment stated that the actions caused damage of over €4 million to the budget of Macedonian Telecommunication. Due to the Macedonian government’s part ownership in Macedonian Telecommunications at the time, the state budget was affected by €2 million.

The case was filed in front of Macedonian criminal court in 2011. However, it did not progress until April 2019 when it was taken over by the Public Prosecutor’s Office for organised crime and corruption.

The directors pumped money from Macedonian Telecom through the fallacious consultation agreements. The money was used to pay bribes to Macedonian government authorities to postpone the passing of the new telecommunication law. The law would have allowed a third mobile operator to enter the Macedonian telecommunication market. It would also have lowered the prices of telecommunication services (see here).

This provided and granted a monopoly to Macedonian Telecom, of which Magyar Telekom owned 53% through its daughter company the Stonebridge Group, and the Macedonian government owned 47%. It also allowed Macedonian Telecom to make significant extra profits by artificially inflating the prices of telephone and internet services.

The US Securities and Exchange Commission filed a complaint to the US Southern District Court of New York in December 2011, reporting violation of the Foreign Corrupt Practices Act by the chairman, the chief executive and other executives of Magyar Telekom. The indictment was possible as Magyar Telekom and Deutsche Telecom, as the owner of Magyar Telekom, were listed on the US Stock Exchange (see here).

This lawsuit ended with a deferred prosecution agreement between the US Department of Justice and Magyar Telekom. Magyar Telekom admits, accepts and acknowledges that it is responsible for the acts of its officers, employees and agents as charged in the information, and that the Department of Justice will prepare information based on a report by the company’s auditors on potential misconduct and bribery. Magyar Telekom commits to cooperate in the investigation with the Department of Justice under the terms of the agreement. The department agrees that it will not bring any criminal case against Magyar Telekom related to the conduct of present and former officers, directors, employees, agents and consultants. Under the agreement, Magyar Telekom paid a fine of $59,600,000 (€46,000) for bribery violation and books and records violation.

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